New York City Faces Tough Choices on Pensions and Public Transit

Economist warns city can't afford both big pensions and free buses

Apr. 9, 2026 at 11:44am

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A minimalist abstract composition of intersecting triangles and rectangles in shades of blue, red, and yellow, conveying the conceptual tension between public sector costs and public services in a major city.As New York City grapples with funding public pensions and free buses, a geometric visual metaphor captures the difficult trade-offs facing urban leaders.NYC Today

According to economist Allison Schrager, cities like New York and Chicago are in deep financial trouble and have two options: raise taxes and reduce the scale of government, or continue to live in a state of denial and hope for a bailout. Schrager argues that New York City specifically cannot afford to maintain its generous public pension system while also providing free public transportation.

Why it matters

This dilemma highlights the difficult trade-offs cities face in balancing their budgets, especially when it comes to funding public services and employee benefits. As cities grapple with rising costs and declining revenues, they must make tough choices that will impact both taxpayers and public sector workers.

The details

Schrager argues that New York City's pension obligations have become unsustainable, consuming a growing share of the city's budget. At the same time, the city has moved to provide free bus and subway service, which Schrager says the city cannot afford alongside the pension commitments. She believes the city will ultimately have to raise taxes, reduce pension benefits, or scale back public transit in order to get its fiscal house in order.

  • The article was published on April 9, 2026.

The players

Allison Schrager

An economist who has written about the fiscal challenges facing cities like New York and Chicago.

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What they’re saying

“Cities such as New York and Chicago are in deep financial trouble. Broadly speaking, they have two options: Make the difficult but appropriate choice to raise taxes and reduce the scale of government, or continue to live in a state of denial and hope for a bailout.”

— Allison Schrager, Economist

The takeaway

This story highlights the difficult tradeoffs cities face in balancing their budgets, especially when it comes to funding public services and employee benefits. As cities grapple with rising costs and declining revenues, they must make tough choices that will impact both taxpayers and public sector workers.